Farm Bill Subsidies Grow, Told You Sow

According to new analysis (sub. req’d) by economists with the University of Missouri’s Food and Agricultural Policy Research Institute, the farm bill’s new Price Loss Coverage (PLC) program and Agriculture Risk Coverage (ARC) program will cost more than the Congressional Budget Office (CBO) predicted before the farm bill became law:

Despite the elimination of direct payments, the new farm bill is going to pay off better than the 2008 law for many growers and could be more costly to taxpayers than the Congressional Budget Office estimated, according to an analysis released Thursday that provides the first up-to-date look at the bill’s impact.

According to economists with the University of Missouri’s Food and Agricultural Policy Research Institute, the cost of the farm bill’s new Price Loss Coverage program will start at $2.1 billion for this year’s crops and increase to $3.4 billion by 2018.

CBO had estimated the PLC would cost roughly $1.6 billion to $1.7 billion a year through 2019. The CBO analysis was based off a forecast issued last year when market prices were higher. PLC will trigger payments when prices fall below fixed levels, or reference prices.

Lawmakers pushing for that farm bill’s passage touted CBO’s original estimates as savings, and praised the transition from direct payments to new crop insurance programs. It turns out, they didn’t have reason to celebrate:

Wheat growers, for example, received $13.56 an acre in direct payments last year, but they stand to receive more than $17 to $18 an acre in annual PLC payments on their 2015 to 2018 crops.

Corn growers got direct payments of $21.66 per acre, but FAPRI estimates they’ll receive $24.65 an acre on average for 2014 under the new Agriculture Risk Coverage program, which will cover a portion of their revenue losses not covered by crop insurance.

Conservatives had long been aware that the new farm bill would be more costly, and we took issue specifically with these new crop insurance programs. “While some bad subsidies and programs were removed, lawmakers replaced them with even riskier taxpayer-funded programs.”

We highlighted the risks associated with including the Senate’s Agriculture Risk Coverage (ARC) program, which according to analysis by the American Enterprise Institute could coast at much as $7 billion annually based on the 15-year historical average price. We warned against the House’s Price Loss Coverage (PLC) program, which set the baseline for commodity prices higher than what would be necessary to cover major losses.

“These baseline scoring gimmicks could wipe out all the “savings” that negotiators are touting in the conference report,” we explained.

Yet, before the farm bill became law and even after it was signed by the President, farm bill supporters’ spin was like something out of an Orwell novel. Doublespeak at its finest.

When President Obama signed the food stamp and farm bill into law on February 7, Rep. Frank Lucas (R-OK)52%praised the farm bill conference report and touted the repeal of direct payments as a victory:

Today our concerns are rightly placed on reducing the size and cost of the federal government. With the president signing the Agricultural Act of 2014 into law, we mark a new era of farm and food policy that values saving money, reforming or repealing government programs, and yet still providing an effective safety net for the production of our national food supply and for those Americans who are struggling.

From now on, farmers will protect themselves from disaster with risk management programs like crop insurance. Instead of getting a government check even in good times, farmers will pay an insurance bill every year and will only receive support from that insurance in years when they take a loss. Because crop insurance is very expensive for most farmers, the federal government helps pay a portion of the premium. This approach saves taxpayers billions of dollars and is much more sensible than direct payments.

…

The choice is simple — we can cling to the outdated and bloated farm policies of the past, or move to more responsible and cost-effective farm programs.

As we warned in our key vote against the farm bill, it turns out we have done anything but “move to more responsible and cost-effective farm programs.”

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